Millions to see energy bills fall by £75 as price cap is lowered
Ofgem said the maximum firms will be able to charge a typical dual fuel customer on a standard variable tariff will fall from £1,254 a year to £1,179 from October.
The energy price cap was first introduced at the start of this year to give customers on pricey standard or default tariffs a better deal.
It is updated every April and October to take into account the varying costs of wholesale energy.
The cap was first set at £1,137 but increased to £1,254 in April, adding an extra £117 a year to the average bill.
Suppliers started raising prices to the limit within days of the cap going up, wiping out the average £76 savings it initially provided households.
A further 4 million customers on pre-payment meters will see their bills drop too after their price cap was lowered by £25 to £1,217.
Dermot Nolan, chief executive of Ofgem, said: “The price caps require suppliers to pass on any savings to customers when their cost to supply electricity and gas falls.
“This means the energy bills of around 15 million customers on default deals or pre-payment meters will fall this winter to reflect the reduction in cost of the wholesale energy.”
Switch to save more
The new caps – which will take effect in two months’ time – will mean lower bills for the 11 million households on standard variable tariffs.
But even then, customers on these tariffs are still likely to be overpaying for their energy.
They are being urged to switch to a better deal today.
Zoe Harris, chief executive at auto-switching service WeFlip said: “The price cap lulls us into a false sense of security when it comes to paying for our energy. The reality is there’s a high chance you’re still paying far more than you should be.”
In fact, with the cap at the current £1,254 and the cheapest available tariff on the market at £873 per year, households could save an impressive £381 by switching tariff.
Stephen Murray, energy expert at MoneySuperMarket, said: “Despite the price cap level dropping by £75, it’s still more than the original level of £1,137 and crucially, there are more than 100 cheaper tariffs available to consumers in the market today.”
According to research from auto-switching service Look After My Bills, an estimated 41 suppliers will have to lower prices with the new price cap review.
Eleven suppliers – including all the Big Six (British Gas, E.On, Scottish Power, EDF Energy, SSE and nPower) charge the maximum of £1,254, while 23 suppliers are within £10 of the current cap.